Sept. 6, 2010 – Peel away the issues slowing parts dept. sales

The green dot. Or maybe it was yellow.
I can’t recall the color, but I certainly recall the colored dot concept.
In fact, of the probably 50 dealers in the room that day some two years ago at an industry seminar, I’m sure most of them could remember the idea just as well.
It went like this: Go to your nearest office supply store and buy a box or two of those small, peel-off color stickers. Each circular sticker is about the size of a penny, and they come in various colors. Green, yellow, etc.
Then every time a part, garment or accessory is delivered to the store, put a sticker on its box or packaging. But keep using the same sticker color for a set period of time, say three months. So if you start tomorrow, let’s say you use green dots until the first of the year and then switch over to yellow for the next three-month period.
By the start of the next riding season — or least the one for us Northerners — can you imagine how easy it would be to identify the age of your inventory? You could literally walk your PG&A department and get an extremely fast idea of how much of your inventory is three months old vs. six months old or worse yet.
Are there better, more concise ways of analyzing inventory? Oh certainly, but let’s face it: Our PG&A inventory management as an industry is off-the-charts bad. How else do you rationalize the fact that as a percentage of total dealership revenue, today’s P&A sales on average are not any stronger than they were three years ago?
That fact doesn’t make any sense to me. We know consumers are holding on to their powersports vehicles longer and are still using them as frequently as they were before the recession. Thus, P&A commodity sales remain strong. We also know the used market remains strong and that riders of “new” used bikes almost certainly personalize their new unit through P&A.
So why do we remain stuck in neutral in regard to how P&A fits into that dealership revenue pie?
As you’ll see in the next couple of weeks, Powersports Business recently did a national survey with its marketing partner, Irwin Broh & Associates, that examined the current dealership revenue pie. So what percent of total store revenue comes from new unit and preowned sales not to mention the parts, service and F&I departments. The complete survey findings — and how they compare to the pre-recession time — will be unveiled in Powersports Business’ 2010 Market Data Book.
Without giving away too much, I can tell you that parts department sales as a percentage of total store sales is nearly the same as it was three years ago. Some in the industry would suggest that’s merely a cause-and-effect relationship. That new unit sales are down, thus our sales of PG&A are going to be similarly decreased because we rely so heavily on such sales that go with the new unit purchase.
My response: Why?
Why are we still relying so heavily on PG&A that only is sold with new unit sales when we know that new unit sales won’t rebound to 2006 or 2007 levels any time soon?
And that completes the whole circle back to the green dot concept. The answer to why we rely so heavily on P&A sales that go hand-in-hand with the new unit sale is simple: We, the dealer, can’t reposition our P&A inventory because we’re still sitting on a whole slew of aging product.
Inventory turns, or the lack of them, are binding us to the past. To me, a few hours work and a heck of a lot of colored dots could make the profit sheet look a lot less red.
Equally important to that green dot is the dot applier, the parts and accessory department staff. A longtime industry trainer and consultant, Sam Dantzler, convinced me of that when we at Powersports Business were creating the seminar schedule for the upcoming Profit Xcelerator, a dealership educational conference & expo. So at the Oct. 15-17 event in Las Vegas you’ll see Dantzler discussing “4 strategies to increase PG&A profits,” including the change that needs to happen with the parts department staff.
Change, whether it comes in the form of a circular green sticker or a revised parts department policy, needs to happen and we’re hoping that Profit Xcelerator (www.powersportsbusiness.com/PSBCE/index.cfm) can help speed that process. The event drew more than 250 dealers last year, including Candace Laidig of Holeshot KTM.
Candace later told us: “I found the entire (2009) event to be a real eye-opener for me. I was stuck in this rut. All of the seminars sort of snapped me back to now! What I mean is here I am going along and doing the same old thing, day after day. Yes, I was trying to stay current. Yes, our business was doing as well as could be expected with this miserable economy. Yes, everyone there at the event liked our Web site. But the pointers I got from these sessions made me realize that it was time to act. Not react, but act.”
Choose your color and your concept, but act. We believe Profit Xcelerator can accelerate that process so that the green in your P&A department will reflect much more than just the color of your inventory process.

Feedback

I heard from many of you in reaction to the August edition’s news cover article, “Boom & bust.” It was overwhelmingly positive, which shows that even a difficult story to tell is one worth sharing.
Robert Hintz, general manager of a Wisconsin multibrand dealership, put it best.
“That story hit me right in the gut!” he said. “I could feel and sense every emotion they were going through … It forced me to review my plan and we are taking additional steps to cut cost here at Engelhart.” PSB